IDEXX Laboratories Announces First Quarter Results

WESTBROOK, Maine, April 20, 2012 /PRNewswire/ -- IDEXX Laboratories, Inc. (NASDAQ: IDXX), today reported that revenues for the first quarter of 2012 increased 10% to $322.7 million, from $292.7 million for the first quarter of 2011. Organic revenue growth[1] was ­10%. Earnings per diluted share ("EPS") for the quarter ended March 31, 2012 increased 16% to $0.72, compared to $0.62 for the same period in the prior year.

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In addition to discussing first quarter financial and business performance, management will provide an update on the U.S. Federal Trade Commission investigation on the quarterly conference call scheduled for 9:00 a.m. (eastern) today.

"I am pleased with our first quarter results," stated Jonathan Ayers, Chairman and Chief Executive Officer. "Our 10% organic growth in the first quarter, in an economic environment that remains challenging, demonstrates the success of our strategy to bring innovative products and services to our veterinary and other customers, as well as strong commercial execution in markets around the world."

"Our pace of innovation continues in the second quarter as we look forward to launching new products to expand the diagnostic capability of veterinarians. Our SNAP® 4Dx® Plus Test, recently approved by the USDA[2], expands the value of vector-borne disease screening with the ability to test for two additional pathogens. Our test to detect levels of Phenobarbitol, a standard therapy used to control seizures in dogs, represents a valuable expansion of the menu of our Catalyst Dx® chemistry analyzer."

Revenue Performance

Please refer to the table below entitled "Revenues and Revenue Growth Analysis by Product and Service Categories" in conjunction with the following discussion.

Companion Animal Group. Companion Animal Group ("CAG") revenues for the first quarter of 2012 were $268.1 million compared to $240.6 million for the first quarter of 2011. Organic growth of 10% was due primarily to growth in our reference laboratory diagnostic and consulting services business and in our instrument and consumables business. In our reference laboratory diagnostic and consulting services business, revenues increased due to higher sales volumes driven primarily by the acquisition of new customers due, in part, to geographic expansion. The revenue increase in our instruments and consumables business was largely the result of higher sales volumes of our Catalyst Dx® and ProCyte Dx® instruments and related consumables. Revenue from acquisitions contributed 2% to revenue growth and changes in foreign currency exchange rates reduced revenue growth by less than 1%.

Water. Water revenues for the first quarter of 2012 were $19.6 million compared to $19.0 million for the first quarter of 2011. Organic revenue growth of 4% was due primarily to higher Colilert® product sales volumes driven by new account acquisitions. Changes in foreign currency exchange rates reduced revenue growth by less than 1%.

Livestock and Poultry Diagnostics. Livestock and Poultry Diagnostics ("LPD") revenues for the first quarter of 2012 were $22.2 million compared to $23.9 million for the first quarter of 2011. The 6% decline in organic revenue was due, in part, to lower sales of Bovine Spongiform Encephalopathy ("BSE" or otherwise commonly referred to as mad cow disease) tests resulting from changes in European Union BSE testing requirements. Effective July 1, 2011, the age at which healthy cattle to be slaughtered are required to be tested for BSE in the European Union was increased from 48 to 72 months, which is reducing the population of cattle tested for this disease. Changes in foreign currency exchange rates reduced revenue growth by 2%.

Additional Operating Results for the First Quarter

Gross profit for the first quarter of 2012 increased $19.8 million, or 13%, to $174.8 million from $154.9 million for the first quarter of 2011. As a percentage of total revenue, gross profit increased to 54% from 53%. The increase in the gross profit percentage was due primarily to lower overall manufacturing costs and the favorable impact of currency as hedging gains more than offset the net unfavorable impact of changes in foreign currency exchange rates.

Selling, general and administrative ("SG&A") expense for the first quarter of 2012 was $93.8 million, or 29% of revenue, compared to $83.6 million, or 29% of revenue, for the first quarter of 2011. The increase in SG&A expense was due primarily to increased personnel-related costs and higher costs attributable to investments in information technology. Research and development ("R&D") expense for the first quarter of 2012 was $20.6 million, or 6% of revenue, compared to $17.8 million, or 6% of revenue for the first quarter of 2011. The increase in R&D expense resulted primarily from higher external consulting and development costs and increased personnel-related costs.

Supplementary Analysis of Results

The accompanying financial tables provide more information concerning our revenue and other operating results for the three months ended March 31, 2012.

Outlook for 2012

The Company provides the following updated guidance for the full year of 2012. This guidance reflects an assumption that the value of the U.S. dollar relative to other currencies will remain at our current assumptions of the euro at $1.30, the British pound at $1.57 and the Canadian dollar at $1.00 for the balance of 2012. Based on these assumptions, a 1% strengthening of the U.S. dollar would decrease revenue by approximately $4.5 million and operating profit by approximately $0.8 million on an annual basis. Fluctuations in foreign currency exchange rates from current assumptions could have a significant positive or negative impact on our actual results of operations for 2012.

  • Revenues are expected to be $1.31 to $1.32 billion, which represents both reported and organic revenue growth of 8 to 9%. The increase in reported revenue growth compared to our previous guidance is due primarily to favorable changes in foreign currency exchange rates, reflecting a weakening of the U.S. dollar relative to other currencies since the date of our previous guidance.
  • EPS are expected to be $3.07 to $3.12, compared to our previous guidance of $3.04 to $3.10. The increase in guidance reflects the favorable impact of changes in foreign currency exchange rates. The modest tightening of our range toward the high end reflects an additional penny from business performance.
  • Free cash flow is expected to be 110% of net income.[3]
  • Capital expenditures are expected to be approximately $60 million.

Conference Call and Webcast Information

IDEXX Laboratories will be hosting a conference call today at 9:00 a.m. (eastern) to discuss its first quarter results and management's outlook, and will also provide an update on the U.S. Federal Trade Commission investigation. To participate in the conference call, dial 1-612-288-0340 or 1-800-230-1096 and reference confirmation code 243564. An audio replay will be available through April 27, 2012 by dialing 1-320-365-3844 and referencing replay code 243564.

The call will also be available via live or archived webcast on the IDEXX Laboratories' web site at http://www.idexx.com.

Annual Meeting

IDEXX Laboratories, Inc. today announced that it will host a simultaneous webcast of its Annual Meeting of Stockholders, to be held on Wednesday, May 9, 2012, at 10:00 a.m. (eastern) at IDEXX Laboratories, One IDEXX Drive, Westbrook, Maine.

Chairman and Chief Executive Officer, Jonathan Ayers will chair the meeting. Investors may listen to live audio of the Annual Meeting and view a presentation via a link on the Company's web site, http://www.idexx.com. An archived edition of the meeting will be available after 1:00 p.m. (eastern) on that day via the same link.

About IDEXX Laboratories, Inc.

IDEXX Laboratories, Inc. is a leader in pet healthcare innovation, serving practicing veterinarians around the world with a broad range of diagnostic and information technology-based products and services. IDEXX products enhance the ability of veterinarians to provide advanced medical care, improve staff efficiency and build more economically successful practices. IDEXX is also a worldwide leader in providing diagnostic tests and information for livestock and poultry and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories employs more than 5,000 people and offers products to customers in over 100 countries.

Note Regarding Forward-Looking Statements

This press release contains statements about the Company's business prospects and estimates of the Company's financial results for future periods that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as "expects," "may," "anticipates," "intends," "would," "will," "plans," "believes," "estimates," "should," and similar words and expressions. These statements are based on management's expectations of future events as of the date of this press release, and the Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. Actual results could differ materially from management's expectations. Factors that could cause or contribute to such differences include the following: the Company's ability to develop, manufacture, introduce and market new products and enhancements to existing products; the Company's ability to achieve cost improvements in its worldwide network of laboratories and in the manufacture of in-clinic instruments;the Company's ability to identify acquisition opportunities, complete acquisitions and integrate acquired businesses; disruptions, shortages or pricing changes that affect the Company's purchases of products and materials from third parties, including from sole source suppliers; the Company's ability to manufacture complex biologic products; the impact of a weak economy on demand for the Company's products and services; the effectiveness of the Company's sales and marketing activities; the effect of government regulation on the Company's business, including government decisions about whether and when to approve the Company's products and decisions regarding labeling, manufacturing and marketing products; the impact of the resolution of the U.S. Federal Trade Commission investigation into our marketing and sales practices; the Company's ability to obtain patent and other intellectual property protection for its products, successfully enforce its intellectual property rights and defend itself against third party claims against the Company; the impact of distributor purchasing decisions on sales of the Company's products that are sold through distribution; the impact of competition, technological change, and veterinary hospital consolidation on the markets for the Company's products; changes or trends in veterinary medicine that affect the rate of use of the Company's products and services by veterinarians; the impact of the Company's inexperience and small scale in the human point-of-care market; the effects of operations outside the U.S., including  from currency fluctuations, different regulatory, political and economic conditions, and different market conditions; the effects of interruptions to the Company's operations due to natural disasters or system failures; the impact of any class action litigation due to stock price volatility; the effect on the Company's stock price if quarterly or annual operations results do not meet expectations of market analysts or investors in future periods; and potential exposures related to our worldwide provision for income taxes and the potential loss of tax incentives. A further description of these and other factors can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2011,in the section captioned "Risk Factors."

IDEXX Laboratories, Inc. and Subsidiaries







Consolidated Statement of Operations







Amounts in thousands except per share data (Unaudited)



















Three Months Ended







March 31,

March 31,







2012

2011

Revenue:

Revenue





$          322,676

$        292,672

Expenses and








Income:

Cost of revenue





147,902

137,747


Gross profit





174,774

154,925


Sales and marketing





57,632

50,985


General and administrative





36,178

32,596


Research and development





20,557

17,812


Income from operations





60,407

53,532


Interest expense, net





(757)

(359)


Income before provision for income taxes





59,650

53,173


Provision for income taxes





18,916

16,567

Net Income:

Net income





40,734

36,606


Less: Noncontrolling interest in subsidiary's








losses





(9)

(6)


Net income attributable to stockholders





$            40,743

$          36,612


Earnings per share: Basic





$                0.74

$              0.64


Earnings per share: Diluted





$                0.72

$              0.62


Shares outstanding: Basic





55,208

57,457


Shares outstanding: Diluted





56,439

59,090









IDEXX Laboratories, Inc. and Subsidiaries







Selected Operating Information (Unaudited)




















Three Months Ended







March 31,

March 31,







2012

2011

Operating

Gross profit





54.2%

52.9%

Ratios (as a

Sales, marketing, general and







percentage of

administrative expense





29.1%

28.6%

revenue):

Research and development expense





6.4%

6.1%


Income from operations(1)





18.7%

18.3%

















International

International revenue (in thousands)





$         132,284

$         122,571

Revenue:

International revenue as percentage of








total revenue





41.0%

41.9%









(1) Amounts presented may not recalculate due to rounding.




 


IDEXX Laboratories, Inc. and Subsidiaries







Segment Information







Amounts in thousands (Unaudited)


















Three Months Ended


Three Months Ended




March 31,

Percent of


March 31,

Percent of




2012

Revenue


2011

Revenue

Revenue:

CAG


$             268,073



$        240,589



Water


19,582



18,965



LPD


22,182



23,939



Other


12,839



9,179



Total


$            322,676



$        292,672










Gross Profit:

CAG


$            139,401

52.0%


$        123,351

51.3%


Water


12,967

66.2%


11,391

60.1%


LPD


15,182

68.4%


16,547

69.1%


Other


5,317

41.4%


3,742

40.8%


Unallocated Amounts


1,907

N/A


(106)

N/A


Total


$            174,774

54.2%


$        154,925

52.9%









Income from








Operations:

CAG


$              46,918

17.5%


$           42,972

17.9%


Water


8,295

42.4%


6,947

36.6%


LPD


5,266

23.7%


7,150

29.9%


Other


538

4.2%


(550)

(6.0%)


Unallocated Amounts


(610)

N/A


(2,987)

N/A


Total


$             60,407

18.7%


$           53,532

18.3%










 

IDEXX Laboratories, Inc. and Subsidiaries

Revenues and Revenue Growth Analysis by Product and Service Categories

Amounts in thousands (Unaudited)















Three Months Ended

Net Revenue

March 31, 2012



March 31, 2011


Dollar

Change


Percentage

Change


Percentage

Change from

Currency (1)


Percentage

Change from

Acquisitions (2)


Organic Revenue

Growth (3)






















CAG

$

268,073


$

240,589


$

27,484


11.4%


(0.5%)


1.5%


10.4%

Water


19,582



18,965



617


3.3%


(0.3%)


-


3.6%

LPD


22,182



23,939



(1,757)


(7.3%)


(1.7%)


-


(5.6%)

Other


12,839



9,179



3,660


39.9%


0.6%


-


39.3%

Total

$

322,676


$

292,672


$

30,004


10.3%


(0.5%)


1.2%


9.6%












































Three Months Ended

Net CAG Revenue

March 31, 2012



March 31, 2011


Dollar

Change


Percentage

Change


Percentage

Change from

Currency (1)


Percentage

Change from

Acquisitions (2)


Organic Revenue
Growth
(3)






















Instruments and consumables

$

101,997


$

93,887


$

8,110


8.6%


(0.6%)


-


9.2%

Rapid assay products


43,664



38,617



5,047


13.1%


(0.2%)


-


13.3%

Reference laboratory diagnostic and consulting services


101,862



89,128



12,734


14.3%


(0.5%)


3.9%


10.9%

Practice management systems and digital radiography


20,550



18,957



1,593


8.4%


(0.1%)


-


8.5%

Net CAG revenue

$

268,073


$

240,589


$

27,484


11.4%


(0.5%)


1.5%


10.4%






















 

(1) The percentage change from currency is a non-U.S. GAAP measure. It represents the percentage change in revenue resulting from the difference between the average exchange rates during the three months ended March 31, 2012 and the same period of the prior year applied to foreign currency denominated revenues for the three months ended March 31, 2012.

 

(2) The percentage change from acquisitions is a non-U.S. GAAP measure. It represents the percentage change in revenue during the three months ended March 31, 2012 compared to the three months ended March 31, 2011 attributed to acquisitions subsequent to December 31, 2010.

 

(3) Organic revenue growth is a non-U.S. GAAP measure and represents the percentage change in revenue during the three months ended March 31, 2012 compared to the three months ended March 31, 2011 net of acquisitions and the effect of changes in foreign currency exchange rates.


IDEXX Laboratories, Inc. and Subsidiaries







Consolidated Balance Sheet







Amounts in thousands (Unaudited)





















March 31,

December 31,







2012

2011

Assets:

Current Assets:








Cash and cash equivalents





$           185,491

$          183,895


Accounts receivable, net





160,981

141,275


Inventories





141,104

133,099


Other current assets





57,290

65,958


Total current assets





544,866

524,227


Property and equipment, net





216,927

216,777


Other long-term assets, net





299,312

289,810


Total assets





$        1,061,105

$       1,030,814

Liabilities and








Stockholders'








Equity:

Current Liabilities:








Accounts payable





$             40,614

$            36,551


Accrued liabilities





126,092

141,383


Debt





254,931

243,917


Deferred revenue





15,647

15,028


Total current liabilities





437,284

436,879


Long-term debt, net of current portion





2,263

2,501


Other long-term liabilities





54,677

51,841


Total long-term liabilities





56,940

54,342










Total stockholders' equity



566,876

539,579


Noncontrolling interest




5

14


Total equity




566,881

539,593


Total liabilities and stockholders' equity




$       1,061,105

$        1,030,814

























IDEXX Laboratories, Inc. and Subsidiaries







Selected Balance Sheet Information (Unaudited)

















March 31,


December 31,

September 30,


June 30,

March 31,



2012


2011

2011


2011

2011

Selected                  









Balance Sheet

Days sales outstanding (1)

42.7


41.0

43.1


41.2

40.2

Information:

Inventory turns (2)

1.8


1.8

1.7


1.7

1.8










(1)     Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that quarter, the result of which is then multiplied by 91.25 days.

(2)     Inventory turns represents inventory-related cost of product sales for the 12 months preceding each quarter-end divided by the inventory balance at the end of the quarter.


IDEXX Laboratories, Inc. and Subsidiaries







Consolidated Statement of Cash Flows







Amounts in thousands (Unaudited)





















Three Months Ended







March 31,

March 31,







2012

2011

Operating:

Cash Flows from Operating Activities:








Net income





40,734

36,606


Non-cash charges





17,647

18,929


Changes in assets and liabilities



(38,679)

(23,299)


Tax benefit from share-based compensation arrangements


(4,518)

(7,018)


Net cash provided by operating activities





$        15,184

$           25,218

Investing:

Cash Flows from Investing Activities:








Purchases of property and equipment





(9,446)

(9,575)


Proceeds from disposition of pharmaceutical product lines



3,000

3,000


Proceeds from sale of property and equipment




2

82


Acquisition of intangible asset



(900)

-


Net cash used by investing activities




$         (7,344)

$            (6,493)

Financing:

Cash Flows from Financing Activities:








Borrowings (payments) on revolving credit facilities, net



11,000

(2,487)


Payment of notes payable





(224)

(210)


Repurchases of common stock





(27,630)

(39,940)


Proceeds from the exercise of stock options and employee stock purchase plans


5,772

12,169


Tax benefit from share-based compensation arrangements


4,518

7,018


Net cash used by financing activities




$        (6,564)

$          (23,450)


Net effect of changes in exchange rates on cash





320

1,269


Net increase (decrease) in cash and cash equivalents





1,596

(3,456)


Cash and cash equivalents, beginning of period




183,895

156,915


Cash and cash equivalents, end of period





$       185,491

$          153,459

















IDEXX Laboratories, Inc. and Subsidiaries







Free Cash Flow







Amounts in thousands (Unaudited)













Three Months Ended







March 31,

March 31,







2012

2011

Free Cash








Flow:

Net cash provided by operating activities





$       15,184

$      25,218


Royalty prepayment to obtain exclusive patent rights





6,250

-


Financing cash flows attributable to tax benefits from share-based compensation arrangements


4,518

7,018


Purchases of property and equipment





(9,446)

(9,575)


Free cash flow





$       16,506

$      22,661



















 

IDEXX Laboratories, Inc. and Subsidiaries







Common Stock Repurchases







Amounts in thousands except per share data (Unaudited)










Three Months Ended







March 31,

March 31,







2012

2011


Share repurchases during the period





333

538


Average price paid per share





$            82.85

$           74.21










Shares remaining under repurchase authorization as of March 31, 2012 totaled 4,054,226.                                 












Share repurchases do not include shares surrendered by employees in payment for the minimum required withholding taxes due on the vesting of
restricted stock units and the settlement of deferred stock units.







[1]   Organic revenue growth for the first quarter of 2012 excludes revenue from business acquisitions, which contributed 1% to revenue growth, and the impact of changes in foreign currency exchange rates, which reduced revenue growth by less than 1%.

[2] U.S. Department of Agriculture

[3] Free cash flow is a non-U.S. GAAP measure. We calculate free cash flow as cash generated from operations, excluding our royalty prepayment in the first quarter of 2012, and tax benefits attributable to share-based compensation arrangements, reduced by our investments in fixed assets. We feel free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in fixed assets that are required to operate the business. We believe this is a common financial measure useful to further evaluate the results of operations. Refer to our reconciliation above for our calculation of free cash flow. With respect to this particular forward-looking projection, the Company is unable to provide a quantitative reconciliation at this time as the inputs to the measurement are difficult to predict and estimate and are primarily dependent on future events.

Contact: Merilee Raines, Chief Financial Officer, 1-207-556-8155

SOURCE IDEXX Laboratories, Inc.



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